II. Executive Summary
The Executive Summary points out the overall highlights of the business plan as well as the bird's-eye view of its sections.
It must be written in simple language that can be easily understood and at the same time attract the attention and influence the decision of the reader.
Investors, creditors and other significant parties usually proceed to the details of the business plan once they find the executive summary interesting, convincing, and worthy of further reading.
The executive summary must include the following sections:
1. Mission, Vision, goals, and objectives of the business
2. Business model
3. Business and product position
4. Wealth improvement approaches
5. Parties supporting the business
I. Mission, Vision, Goals and Objectives
At the very start, the business plan must describe the fundamental characteristics, nature, philosophical values, identity, and image of the business. These important concerns are included in the mission, vision, goals and objective of the business.
Mission statement
- is a short sentence or paragraph used by a company to explain, in simple and concise terms, its purpose/s for being.
(addresses the question why does the company exist or what is the reason for our organization's existence?)
Examples:
Double Happiness
To provide quality food and passenger convenience services that would generate sufficient profits for the stockholders and improve the lives of its employees.
ON Semiconductor Philippines, Inc.
To provide their customers with high quality, and cost effective solutions to solve the demanding power and signal management design challenges.
Google
To organize the world's information to make it universally accessible and useful.
Honest Tea
To create and promote great-tasting, healthy, organic beverages.
Universal Health Services, Inc.
UHS is a comprehensive regional health system whose mission is to improve the health of those we serve through our commitment to excellence in all that we do.
Southwest Air
The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit. We are committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth.
Alzheimer's Association
Our mission. To eliminate Alzheimer's disease through the advancement of research; to provide and enhance care and support for all affected; and to reduce the risk of dementia through the promotion of brain health.
Vision Statement
- the optimal desired future state, the mental picture, of what an organization wants to achieve over time.
Provides guidance and inspiration as to what an organization is focused on achieving in five, ten, or more years.
(answers the questions what do we want to achieve in the future and who do we want to become?)
Examples:
Double Happiness
To establish a commanding presence and market leadership as food chain servicing major bus terminals in Central Luzon within the next five years.
ON Semiconductor Philippines, Inc.
To be the trusted supplier of choice for power, analog, sensor and connectivity solutions that enable energy efficient electronics innovations.
Google
To provide access to the world's information in one click.
Honest Tea strive to grow our business with the same honesty and integrity we use to craft our recipes, with sustainability and great taste for all.
Universal Health Services, Inc.
UHS, the region's leading integrated healthcare system, will demonstrate exceptional value in the delivery of coordinated, patient-centered care.
Southwest Air
To become the world's most loved, most flown, and most profitable airline.
Alzheimer's Association
A world without Alzheimer's disease.
Goals and Objectives
Goals help companies define what they want to achieve.
Examples:
1. to establish a strong market presence in Central Luzon
2. to earn good financial returns for its owners
3. to delight customers with high quality food and services; and
4. to make Double Happiness a happy and rewarding place to work in.
Objective
A business objective is a detailed picture of a step you plan to take in order to achieve a stated aim/goal (specific actions to achieve the goals).
It must be more Specific than the vision and mission statements and should also be Measurable, Achievable, Realistic and Time-bound.
Specific - Be precise about what you are going to achieve.
Measurable - Quantify (measure the size or amount of something and express it as a number) your objectives.
Achievable - possible to be attained.
Realistic - Do you have the resources to make the objective happen (men, money, machines, materials)?
Time bound - associated with a specific time period. State when you will achieve the objective (within a month? By February 2018?)
Examples:
1a. to have 20 food outlets in major bus terminals in Central Luzon within the next five years.
2a. to attain 60 million sales volume within the next five years.
3a. to gain 12% market share in Central Luzon within the next five years.
2a. to realize 10 million net profits for the next five years.
2b. to achieve 30% return on investment by 2022.
3a. to increase the percentage of repeat customers by 50% within the next five years
4a. to decrease the management and employee turnover by 1% per year within the next five years.
4b. to increase the number of job applicants by 30% within the next five years.
More Examples of SMART objectives:
1. Profitability Objectives
To achieve a 20% return on capital employed by August 2019.
To achieve 50% return on investment for stationary by 2019.
Return on investment (ROI) is a financial concept that measures the profitability of an investment. There are several methods to determine ROI, but the most common is to divide net profit by total assets. For instance, if your net profit is $50,000, and your total assets are $200,000, your ROI would be 25 percent.
ROI = net profit
total sales
ROI measures the amount of return on an investment relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment, and the result is expressed as a percentage or a ratio.
ROI = Gain from Investment - Cost of Investment
Cost of Investment
Example:
Joe invested $1,000 in Slice Pizza Corp. in 2010 and sold his shares for a total of $1,200 a year later. To calculate the return on his investment, he would divide his profits ($1,200 - $1,000 = $200) by the investment cost ($1,000), for a ROI of $200/$1,000, or 20%.
2. Market Share Objectives
To gain 25% of the market for sports shoes by September 2018.
To gain 30% market share for stationary by 2018.
3. Objectives for Growth
To increase the size of our Brazilian operation from $200,000 in 2017 to $400,000 in 2018.
4. Objectives for Branding
To make Y brand of bottled beer the preferred brand of 21-28 year old females in North America by February 2017.
II. Business Model
the perspective of the business in terms of structure, production, operation, and financial activities that will lead to the achievement of the Mission, Vision, and Objective.
the business model must basically reflect certain innovations that will indicate the competitiveness of the business in the industry. It must define how the business gives importance to its relations with customers, creditors, suppliers, and internal human resources.
It must be written in simple language that can be easily understood and at the same time attract the attention and influence the decision of the reader.
Investors, creditors and other significant parties usually proceed to the details of the business plan once they find the executive summary interesting, convincing, and worthy of further reading.
The executive summary must include the following sections:
1. Mission, Vision, goals, and objectives of the business
2. Business model
3. Business and product position
4. Wealth improvement approaches
5. Parties supporting the business
I. Mission, Vision, Goals and Objectives
At the very start, the business plan must describe the fundamental characteristics, nature, philosophical values, identity, and image of the business. These important concerns are included in the mission, vision, goals and objective of the business.
Mission statement
- is a short sentence or paragraph used by a company to explain, in simple and concise terms, its purpose/s for being.
(addresses the question why does the company exist or what is the reason for our organization's existence?)
Examples:
Double Happiness
To provide quality food and passenger convenience services that would generate sufficient profits for the stockholders and improve the lives of its employees.
ON Semiconductor Philippines, Inc.
To provide their customers with high quality, and cost effective solutions to solve the demanding power and signal management design challenges.
To organize the world's information to make it universally accessible and useful.
Honest Tea
To create and promote great-tasting, healthy, organic beverages.
Universal Health Services, Inc.
UHS is a comprehensive regional health system whose mission is to improve the health of those we serve through our commitment to excellence in all that we do.
Southwest Air
The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit. We are committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth.
Alzheimer's Association
Our mission. To eliminate Alzheimer's disease through the advancement of research; to provide and enhance care and support for all affected; and to reduce the risk of dementia through the promotion of brain health.
Vision Statement
- the optimal desired future state, the mental picture, of what an organization wants to achieve over time.
Provides guidance and inspiration as to what an organization is focused on achieving in five, ten, or more years.
(answers the questions what do we want to achieve in the future and who do we want to become?)
Examples:
Double Happiness
To establish a commanding presence and market leadership as food chain servicing major bus terminals in Central Luzon within the next five years.
ON Semiconductor Philippines, Inc.
To be the trusted supplier of choice for power, analog, sensor and connectivity solutions that enable energy efficient electronics innovations.
To provide access to the world's information in one click.
Honest Tea strive to grow our business with the same honesty and integrity we use to craft our recipes, with sustainability and great taste for all.
Universal Health Services, Inc.
UHS, the region's leading integrated healthcare system, will demonstrate exceptional value in the delivery of coordinated, patient-centered care.
Southwest Air
To become the world's most loved, most flown, and most profitable airline.
Alzheimer's Association
A world without Alzheimer's disease.
Goals and Objectives
Goals help companies define what they want to achieve.
Examples:
1. to establish a strong market presence in Central Luzon
2. to earn good financial returns for its owners
3. to delight customers with high quality food and services; and
4. to make Double Happiness a happy and rewarding place to work in.
Objective
A business objective is a detailed picture of a step you plan to take in order to achieve a stated aim/goal (specific actions to achieve the goals).
It must be more Specific than the vision and mission statements and should also be Measurable, Achievable, Realistic and Time-bound.
Specific - Be precise about what you are going to achieve.
Measurable - Quantify (measure the size or amount of something and express it as a number) your objectives.
Achievable - possible to be attained.
Realistic - Do you have the resources to make the objective happen (men, money, machines, materials)?
Time bound - associated with a specific time period. State when you will achieve the objective (within a month? By February 2018?)
Examples:
1a. to have 20 food outlets in major bus terminals in Central Luzon within the next five years.
2a. to attain 60 million sales volume within the next five years.
3a. to gain 12% market share in Central Luzon within the next five years.
2a. to realize 10 million net profits for the next five years.
2b. to achieve 30% return on investment by 2022.
3a. to increase the percentage of repeat customers by 50% within the next five years
4a. to decrease the management and employee turnover by 1% per year within the next five years.
4b. to increase the number of job applicants by 30% within the next five years.
More Examples of SMART objectives:
1. Profitability Objectives
To achieve a 20% return on capital employed by August 2019.
To achieve 50% return on investment for stationary by 2019.
Return on investment (ROI) is a financial concept that measures the profitability of an investment. There are several methods to determine ROI, but the most common is to divide net profit by total assets. For instance, if your net profit is $50,000, and your total assets are $200,000, your ROI would be 25 percent.
ROI = net profit
total sales
ROI measures the amount of return on an investment relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment, and the result is expressed as a percentage or a ratio.
ROI = Gain from Investment - Cost of Investment
Cost of Investment
Example:
Joe invested $1,000 in Slice Pizza Corp. in 2010 and sold his shares for a total of $1,200 a year later. To calculate the return on his investment, he would divide his profits ($1,200 - $1,000 = $200) by the investment cost ($1,000), for a ROI of $200/$1,000, or 20%.
2. Market Share Objectives
To gain 25% of the market for sports shoes by September 2018.
To gain 30% market share for stationary by 2018.
3. Objectives for Growth
To increase the size of our Brazilian operation from $200,000 in 2017 to $400,000 in 2018.
4. Objectives for Branding
To make Y brand of bottled beer the preferred brand of 21-28 year old females in North America by February 2017.
II. Business Model
the perspective of the business in terms of structure, production, operation, and financial activities that will lead to the achievement of the Mission, Vision, and Objective.
the business model must basically reflect certain innovations that will indicate the competitiveness of the business in the industry. It must define how the business gives importance to its relations with customers, creditors, suppliers, and internal human resources.
III. Business and Product Position
Business positioning simply refers to the process of determining the place of the business in the industry. The entrepreneur must conduct industry analysis of the different forces that are strong in the industry in order to determine the correct position of the proposed venture. On the other hand, market/product positioning refers to the process of arranging a product to occupy a clear, distinct, and desirable place in relation to other competing products in the mindset of target consumers.
The business and product position will help determine how the business defines its course and the process of accumulating wealth. It tells the size of the market and the target market share of the business and product. The business and product position must be able to convince the readers that the proposed business has a competitive advantage in the market.
IV. Wealth Improvement Approaches
This section of the executive summary describes the methodologies or approaches that will be taken by the business in order to
1. maintain a competitive advantage,
2. position the business in the market,
3. improve the market share, and
4. maximize the utilization of resources
In Porter's view, strategic management should be concerned with building and sustaining competitive advantage.
Competitive Advantage is the attribute that allows an organization to outperform its competitors.
A competitive advantage may include access to natural resources, such as high-grade ores or a low-cost power source, highly skilled labor, geographic location, high entry barriers, and access to new technology.
Value proposition is important when understanding competitive advantage. If the value proposition is effective, that is, that the value proposition offers clients better and greater value, it can produce a competitive advantage in either the product or service. The value proposition can increase customer expectations and choices.
Michael Porter defined the two ways in which an organization can achieve competitive advantage over its rivals: cost advantage and differentiation advantage.
1.Cost advantage is when a business provides the same products and services as its competitors, but at a lesser cost.
2.Differentiation advantage is when a business provides better products and services as its competitors.
Business positioning simply refers to the process of determining the place of the business in the industry. The entrepreneur must conduct industry analysis of the different forces that are strong in the industry in order to determine the correct position of the proposed venture. On the other hand, market/product positioning refers to the process of arranging a product to occupy a clear, distinct, and desirable place in relation to other competing products in the mindset of target consumers.
The business and product position will help determine how the business defines its course and the process of accumulating wealth. It tells the size of the market and the target market share of the business and product. The business and product position must be able to convince the readers that the proposed business has a competitive advantage in the market.
IV. Wealth Improvement Approaches
This section of the executive summary describes the methodologies or approaches that will be taken by the business in order to
1. maintain a competitive advantage,
2. position the business in the market,
3. improve the market share, and
4. maximize the utilization of resources
In Porter's view, strategic management should be concerned with building and sustaining competitive advantage.
Competitive Advantage is the attribute that allows an organization to outperform its competitors.
A competitive advantage may include access to natural resources, such as high-grade ores or a low-cost power source, highly skilled labor, geographic location, high entry barriers, and access to new technology.
Value proposition is important when understanding competitive advantage. If the value proposition is effective, that is, that the value proposition offers clients better and greater value, it can produce a competitive advantage in either the product or service. The value proposition can increase customer expectations and choices.
Michael Porter defined the two ways in which an organization can achieve competitive advantage over its rivals: cost advantage and differentiation advantage.
1.Cost advantage is when a business provides the same products and services as its competitors, but at a lesser cost.
2.Differentiation advantage is when a business provides better products and services as its competitors.
Porter's Generic Strategies
Cost Leadership - basically means the lowest cost of operation in the industry. It is a strategy used by businesses to create low cost products for a broad target market.
Porter's generic strategies are ways of gaining competitive advantage – in other words, developing the "edge" that gets you the sale and takes it away from your competitors. There are two main ways of achieving this within a Cost Leadership strategy:
1. Increasing profits by reducing costs, while charging industry-average prices.
2. Increasing market share through charging lower prices, while still making a reasonable profit on each sale because you've reduced costs.
You therefore need to be confident that you can achieve and maintain the number one position before choosing the Cost Leadership route. Companies that are successful in achieving Cost Leadership usually have:
- Access to the capital needed to invest in technology that will bring costs down.
- Very efficient logistics.
- A low-cost base (labor, materials, facilities), and a way of sustainably cutting costs below those of other competitors.
Differentiation - An approach under which a firm aims to develop unique desirable products for a broad target market or to different customer segments.
Differentiation involves making your products or services different from and more attractive than those of your competitors. How you do this depends on the exact nature of your industry and of the products and services themselves, but will typically involve features, functionality, durability, support, and also brand image that your customers value.
To make a success of a Differentiation strategy, organizations need:
- Good research, development and innovation.
- The ability to deliver high-quality products or services.
- Effective sales and marketing, so that the market understands the benefits offered by the differentiated offerings.
The Focus Strategy
Companies that use Focus strategies concentrate on particular niche markets and, by understanding the dynamics of that market and the unique needs of customers within it, develop uniquely low-cost or well-specified products for the market. Because they serve customers in their market uniquely well, they tend to build strong brand loyalty amongst their customers. This makes their particular market segment less attractive to competitors.
Whether you use Cost Focus or Differentiation Focus, the key to making a success of a generic Focus strategy is to ensure that you are adding something extra as a result of serving only that market niche.
Cost Focus - is a strategy which emphasizes cost-minimization by offering a low cost product in a niche market.
Differentiation Focus - is a strategy which pursue strategic differentiation by offering a specialized product in a niche market.
Cost Leadership - basically means the lowest cost of operation in the industry. It is a strategy used by businesses to create low cost products for a broad target market.
Porter's generic strategies are ways of gaining competitive advantage – in other words, developing the "edge" that gets you the sale and takes it away from your competitors. There are two main ways of achieving this within a Cost Leadership strategy:
1. Increasing profits by reducing costs, while charging industry-average prices.
2. Increasing market share through charging lower prices, while still making a reasonable profit on each sale because you've reduced costs.
You therefore need to be confident that you can achieve and maintain the number one position before choosing the Cost Leadership route. Companies that are successful in achieving Cost Leadership usually have:
- Access to the capital needed to invest in technology that will bring costs down.
- Very efficient logistics.
- A low-cost base (labor, materials, facilities), and a way of sustainably cutting costs below those of other competitors.
Differentiation - An approach under which a firm aims to develop unique desirable products for a broad target market or to different customer segments.
Differentiation involves making your products or services different from and more attractive than those of your competitors. How you do this depends on the exact nature of your industry and of the products and services themselves, but will typically involve features, functionality, durability, support, and also brand image that your customers value.
To make a success of a Differentiation strategy, organizations need:
- Good research, development and innovation.
- The ability to deliver high-quality products or services.
- Effective sales and marketing, so that the market understands the benefits offered by the differentiated offerings.
The Focus Strategy
Companies that use Focus strategies concentrate on particular niche markets and, by understanding the dynamics of that market and the unique needs of customers within it, develop uniquely low-cost or well-specified products for the market. Because they serve customers in their market uniquely well, they tend to build strong brand loyalty amongst their customers. This makes their particular market segment less attractive to competitors.
Whether you use Cost Focus or Differentiation Focus, the key to making a success of a generic Focus strategy is to ensure that you are adding something extra as a result of serving only that market niche.
Cost Focus - is a strategy which emphasizes cost-minimization by offering a low cost product in a niche market.
Differentiation Focus - is a strategy which pursue strategic differentiation by offering a specialized product in a niche market.
Market Share - is the portion of a market controlled by a particular company or product.
- is a firm’s percentage of an industry’s total sales. It is calculated as the product of the firm’s sales over the industry’s sales during a specified period.
- is a firm’s percentage of an industry’s total sales. It is calculated as the product of the firm’s sales over the industry’s sales during a specified period.
Total Revenue/Total Sales = Firm's sales + Specific product sales + Service type sales Total Market Sales = Sales by Big company + Sales by Small company Market Share = Firm's earnings Industries earnings MS = 1,000,000 15,000,000 MS = 0.06 MS = 6% |
The market share indicates how a firm performs relative to its competitors. Usually, a higher market share implies that a firm realizes higher sales than its competitors because it successfully expands its customer base.
V. Parties Supporting the Business
The last section of the executive summary is a description of the parties that strongly support the business. The parties that have a direct relationship with the business are as follows:
1. Consumers
2. Creditors
3. Suppliers
4. Employees and staff
Relevant information about individuals and parties that support the business is important since the proposed business may conduct transactions with them later.
V. Parties Supporting the Business
The last section of the executive summary is a description of the parties that strongly support the business. The parties that have a direct relationship with the business are as follows:
1. Consumers
2. Creditors
3. Suppliers
4. Employees and staff
Relevant information about individuals and parties that support the business is important since the proposed business may conduct transactions with them later.
EXECUTIVE SUMMARY
Mission Statement
Vision Statement
Goals
Objectives
Business Model
Business and Product Position
Wealth Improvement Approaches
Parties Supporting the Business